Barclays Libor fix trail leads to senior managers

* FSA, CFTC quote emails to back findings

* Rates submitted to Libor artificially lowered

* Desire not to stand out in financial crisis

By Sarah White

LONDON, June 27 (Reuters) - Senior Barclays managers were worried over negative headlines during the financial crisis and contributed to a culture that fixed key funding rates artificially low, U.S. and UK regulators said in reaching a settlement with the bank.

The findings based on internal emails and other communications raise questions about how high up the Barclays management chain came instructions to submit lower rates, and who knew about the rate rigging.

Without naming individuals, the regulators' reports refer to pressure and directives from "senior management" at the firm.

Barclays was fined $453 million on Wednesday for manipulating interbank lending rates over several years. These are known as Libor and Euribor, underpinning trillions of dollars of derivatives deals plus corporate and personal borrowing rates.

The U.S. Commodity Futures Trading Commission, the U.S. Department of Justice and the UK's Financial Services Authority settled with Barclays on a civil basis, while Canadian authorities said they still had an open investigation.

The Justice Department said it still had a criminal investigation in progress.

Barclays Chief Executive Bob Diamond, the investment bank unit's boss at the time of the rate fixings, and three of his key lieutenants, said they were giving up their 2012 bonuses in response.

Investigators faulted individual derivatives traders for fixing rate submissions for their own profit, while Barclays was slammed for regularly reporting lower borrowing rates than it was actually paying throughout the financial crisis.

Staff responsible for submitting rates in some instances told colleagues of "internal political" pressure to set these low, the FSA's report shows.

Barclays "senior management at high levels" became concerned over the media scrutinizing the bank's funding access early in the financial crisis, in August 2007.

"Senior management's concerns in turn resulted in instructions being given by less senior managers at Barclays to reduce Libor submissions in order to avoid negative media comment," the UK's FSA said in its report. "The origin of these instructions is unclear."

The U.S. CFTC said specific instructions to lower submissions came from "senior Barclays Treasury managers". They asked submitters to provide rates at a level where Barclays wouldn't be "sticking its head above the parapet".

Barclays' submissions to Libor - a rate compiled daily through a panel of banks quoting the rate at which they estimate they can borrow from one another, in various currencies - were higher than many competitors, attracting attention.

It was this scrutiny, at a time when negative headlines could be incredibly damaging - by September 2007, British savings bank Northern Rock had to be bailed out - that made the bank change its approach to Libor submissions, the regulators said.

CONCERNS RELAYED "UPSTAIRS'

The submission process and the artificial rates were discussed in several conference calls and in emails among Barclays staff, including with senior managers.

The regulators' reports do not show any evidence of specific instructions being relayed to and from the top ranks of the bank, which would have included finance director Chris Lucas or then CEO John Varley.

But there are various references to management above senior treasury functions.

In one phone discussion with senior treasury managers from November 2007, a supervisor of the dollar Libor rate submitters raised concerns that submitting Barclays' truer borrowing rate would "cause a shit storm," the two regulators said. He then asked that the issue be taken "upstairs", to be discussed among higher level managers, the CFTC's report says.

A day later, a senior treasury manager reported back his understanding that "senior management" had discussed the issue, and gave submitters guidance to "stick within the boundsso no head above parapet," the CFTC report added.

Barclays did flag concerns that the Libor rate as a whole was flawed to the rate compiler the British Bankers' Association, and to the FSA and other authorities. But the bank did not tell the FSA it was making submissions influenced by press perceptions, and for many months no changes to the internal submission process were made.

The regulators' reports also lay bare how concerns were not always systematically followed up between compliance units, submitters and senior management, sometimes allowing confusion to reign.

At one stage in late 2008, the FSA's report shows rate submitters thought they were operating under instructions from the Bank of England to lower submissions, after a phone conversation between a "senior individual at Barclays" and the BoE was relayed down the chain of command and miscommunicated.

Though the error was brought up internally, compliance never followed up and spoke with submitters to make sure they were not following this instruction, the FSA said.